China's Parallel Universe

When I'm in China, I often feel as though I'm in a parallel universe. As global as the electronics industry has become, certain things remain distinctly regional. China's tablet and set-top markets are good examples.

SHENZHEN, China — When I'm in China, I often feel as though I've dropped into a parallel universe. But worse, once I get back to the good old US of A, I feel even more lost.

This is because I run smack-dab into Western-centric preconceived views on market trends, design requirements, and market leaders that don't often apply to China.

As global as the electronics industry has become today, certain things remain distinctly regional.

In my mind, the tablet market is a good example. For the full calendar year 2013, worldwide tablet shipments totaled 217.1 million units, according to IDC. Meanwhile, China's tablet shipments during the same period are said to be 90 million units, according to China's local reports. That, in fact, translates into China holding a staggering 40 percent share.

While Apple's iPads and Samsung's Galaxy tablets are the two most recognized brands everywhere (including China), the truth is that Chinese OEMs and ODMs -- almost invisible in the Western markets -- are dominating the global tablet market.

The dominance of Chinese OEMs and ODMs is, in turn, creating a huge opportunity for China's application processor companies in the tablet market.

I remember just a short two years ago, a seemingly countless number of China fabless chip companies were all designing similar ARM-core based apps processors for tablets.

When I recently sat down with Eva Wu, marketing manager of Allwinner Technology in Zhuhai, she set the record straight. "Yes," she told me, "there were 10 apps processor vendors in China, all competing for the tablet market in 2012. But by early 2014, those dominating the tablet market are now pretty much down to only three companies -- Allwinner, RockChip, and MediaTek."

I have always felt that a winnowing-down among China's apps processor vendors was necessary and would happen sooner or later. But I didn't expect such a drastic change so quickly.

The following table, compiled by Chinese industry sources, is a snapshot of China's tablet apps processor market. The 2014 market forecast shows a clear upward trend for Taiwan's MediaTek, doubling shipments and holding its own in China.

Tablet Application Processor Vendors for Chinese Tablets

Source: Compilations of China's industry data

It's easy for the Western players to dismiss what's happening in China, on the presumption that "those guys are playing only in the Tier 2 market."

Know your tier 2 players
Maybe so, but I find that knowing your Tier 2 players (the guy below you on the ladder) is vitally important. Some of those players are very ambitious and climbing fast. They have no intention to remain Tier 2 forever.

Allwinner's Wu proudly told me that Allwinner was the first AP vendor to achieve the Android 4.4 Google Mobile Service certification. Noting that the certification tells the world the stability of Allwinner's apps processor, Wu said, "You have to pass the certification test in order to play in the US market. US retailers like Walmart or BestBuy wouldn't accept the products without it."

Know your Tier 2 players in China's tablet market.

Wu noted that Allwinner's apps processors are getting designed into Tier 1 tablets -- such as Sony's tablet projectors and Samsung's tablet designed for printers.

If you didn't hear this before, then let me say it again: your China reports are miles ahead of anyone else reporting in this sector, as far as transporting the ground realities in tech / semi market of China to the wider audience. I have one suggestion. There ought to be a central location where readers like me can access all your China-focused/centric reporting, blogs, articles, interviews, etc. This EETimes site is quite user-un-friendly, hard to find anything other than a chicken-scratch set of links. Why don't you, Junko Yoshida, put yourself a free Wordpress blog, and crosspost all such China articles over there? That'd be quite useful for readers, you know? Anyway, just a suggestion, and thanks for your China reporting!

Add my congrats to the others on this very thoughful piece. It strikes me that the interface between China and the U.S. is very complex. There is certainly contention in terms of attitude towards media (Note the recent shutdown of access to dvdfab.com, where they sold software to duplicate DVD and Blu-Ray discs) and espionage (reference any number of recent stories on both sides). At the same time there are numerous instances of smaller companies cooperating across this border. My sense is that people and smaller companies on both sides are getting closer together while large institutions / governments are becoming more antagonistic. It seems like that combination has to break one way or the other at some point. Am I too far off base on that?

Definitely there are a lot of grandstanding and posturing going on between China and the West. Politically, it is interesting to follow and even it's fun to write about it. But frankly, we shouldn't get caught up with it too much.

I am not saying those things are unimportant (or insignificant). They are critical in our diplomatic relations which will be necessary to give stability to our economy.

However, we should NOT lose sight on what's going on in our business in a much smaller sacle. The disconnect between what's going on in China and what we THINK going on in China can be big. We should know not only who those [sencond tier] players are, what aspirations they have, but how we can actually work together whenever wherever it is necessary and appropriate.

I too add my congrats ; the electronics sector you describe is just an example among others. After some trips in Asia and Russia, i feel that we, in the West, live in a parrallel universe. I just hope that all those countries (China, India, Corea ...) will stay away from our so called 'values' and be different. Another example? my generation was attracted by the US of A as you say. But no more. My two sons (all two engineers) are working now in Asia. One in Thailand and the other in Hong-Kong. They are so happy i doubt they will be back. They dont miss France, except for some things like cheese and wine, but thats all.